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Investing.com - Axis Capital (NYSE:AXS) downgraded State Bank of India (NSE:SBI) (NSE:SBIN) stock rating to Add from Buy on Wednesday, while lowering its price target to INR860 from INR1,055.
The downgrade comes as Axis Capital analyst Jayant Kharote expects net interest margin (NIM) to face pressure in the near term, projecting a 12 basis points year-over-year decline in fiscal year 2026, driven by lower asset yields.
State Bank of India’s core return on assets could moderate to less than 1% in FY26, according to the research note, though the bank’s strong liability franchise, CRR release, and potential capital-raise could accelerate recovery in FY27.
Despite the downgrade, Axis Capital acknowledges that SBI has built a "formidable retail franchise in both assets and liabilities," positioning its growth and profitability outlook ahead of other public sector bank peers, with asset quality described as "best-in-class."
The firm expects SBI to maintain healthy return on equity of approximately 14-15%, though near-term return on assets moderation could weigh on its valuation at around 1x core price-to-book ratio and limit upside potential.
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